Balance transfer credit cards are credit cards that let you, the customer, transfer the balance from one of themto another card. Balance transfer credit cards can be a good way to save money because most offer an interest-free period to all new customers. This interest-free period can last six months to 15 months, depending on the type of card. If you use balance transfer credit cards wisely, you can even consolidate several balances to one card for a much lower interest rate.
Do your research when selecting a balance transfer card. Chief executive of MoneyExert, Sean Gardner, has been quoted as saying, “As with all credit card deals, you need to check that the card you’re using is suited to your requirements.”
Some cards charge a transfer fee, so this is something you need to take into consideration as well. Once you’ve consolidated you debts, start aggressively attacking the balance by making payments much higher than the minimum required. It’s also a good idea to make more than one payment a month.
The traditional credit card typically requires a monthly minimum payment that covers the interest. Since many balance transfer cards offer 0% interest for a limited time, you probably won’t be required to make a payment for that amount of time. If you’re exceptionally disciplined, you can set up a separate high-interest bank account, put money in it until you have enough to cover the card’s balance, and then pay it off in one large payment. This method will only work if the transferred balance is manageable, if you don’t continue to use the card, and if you have sufficient self-control not to use your saved money on that dream vacation or that coveted product.
Opening a GIC (Guaranteed Investment Contract) is also a good way to pay off a transferred credit card balance if you have a long enough interest-free period and a manageable balance. A GIC will typically give you a higher interest rate than a savings bank account.
There are many different types of GICs available and you’ll need to check with your bank or other banks in your area to see what’s available to you. Money from GICs can only be taken out without penalty once the GIC has matured.
Ideally you should have a GIC for at least one year. One-year GICs can give you an interest return of three to four percent. There are shorter term GICs available, but your ROI (return on investment) will be smaller due to lower interest rates. When using a GIC, you can make saving automatic by arranging for a set amount of money to be removed from your bank account and put to your GIC every month. This way there won’t be money accumulating in a bank account tempting you to spend it.
A word of warning. GICs aren’t going to make your thousands of dollars into millions, but they can get you a little extra money that you didn’t have before. And every penny counts when you’re trying to eliminate your debt.
Balance transfer credit cards that might work well with a GIC are the:
Blue from American Express
Chase Platinum Visa Card
Discover More Card
Miles by Discover Card
Discover More Card – Clear
Discover More Card – Wildlife Collection
Each of these cards has an introductory interest-free period of at least 12 months. The Blue from American Express has an interest-free period for up to 15 months and no annual fee. The regular interest rate is 11.74%. This card has a transfer fee of 4.99%. Some balance transfer credit card companies offer additional perks for transferring your balances to their cards. The Discover More Card gives a $40 Cashback Bonus. The Chase Home Improvement Rewards Card will give you a free Zircon iLine Laser Level, valued at almost $40, after your first purchase on the card.
Always read the small print when applying for a balance transfer credit card. Some of these types of cards only provide the 0% rate on the transferred balance and not on additional purchases. If this is the case, you’ll need to pay the interest on any purchases you make.